Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Apple bypasses MacBook logic board fraud claims, (Jan 9, 2015)

By Greg Hammond, J.D.

Purchasers of Apple Inc.’s MacBook Pro laptop computers were unable to state valid fraud-based unfair competition claims against Apple for allegedly selling the computers with defective logic boards. The federal district court in San Francisco granted Apple’s motion to dismiss the purchasers’ California Unfair Competition Law (UCL), Consumers Legal Remedies Act (CLRA), and Texas Deceptive Trade Practices Act (DTPA) class action claims (Marcus v. Apple Inc., January 8, 2015, Alsup, W.).

Background. Uriel Marcus and Benedict Verceles both purchased MacBook Pro laptop computers from Apple in 2011 and 2012 that allegedly failed due to defective logic boards. The pair of consumers filed a class action suit against Apple, alleging that (1) the logic board failure was the result of negligent design, production, and testing; (2) Apple was aware of the defect for over six years; (3) the company failed to notify consumers of the defect; and (4) Apple continues to market and sell the defective logic boards. The consumers brought claims, in part, under the UCL, CLRA, and DTPA. Apple moved to dismiss, alleging that the consumers failed to state their fraud-based UCL, CLRA, and DTPA claims with the particularity required under Federal Rule of Civil Procedure 9(b).

UCL claims. Marcus and Verceles alleged that Apple violated both the unlawful and unfair prongs of the UCL. However, neither argument was pleaded with requisite particularity. Specifically, the court found that the consumers merely listed statutes that Apple allegedly violated in support of their unlawful prong claim, but failed to establish any actual underlying violation. In addition, the consumers merely stated in a conclusory fashion that Apple’s practices “offend public policy and are unethical, oppressive, unscrupulous” and violated certain laws. They failed, however, to state what public policy was offended, or why Apple’s acts were unethical, oppressive, or unscrupulous under the unfair prong. The consumers’ unsupported UCL claims were consequently dismissed.

CLRA claims. The complaint also alleged that Apple violated three subsections of the CLRA by (1) misrepresenting “that the laptops in question have characteristics, benefits, or uses which they do not have”; (2) misrepresenting “that the laptops in question are of a particular standard, quality, and/or grade, when they are of another”; and (3) advertising “the laptops in question with the intent not to sell them as advertised or represented.”

In support of their allegations, the consumers set forth four examples of representations or advertisements purportedly made by Apple regarding the laptop computers. The complaint only averred that, contrary to Apple’s advertisements, the company’s logic board is not “durable” or “designed to withstand the rigors of life on the go, but rather is defective and tends to fail when used as intended.” The court concluded that the consumers failed to specifically allege how Apple’s statements were false or misleading, and none of Apple’s alleged representations actually contained the word “durable.” Consequently, the four representations were deemed puffery, and the motion to dismiss the CLRA claims was granted.

DTPA claims. The consumer’s DTPA claims, as they related to affirmative representations allegedly made by Apple, were dismissed for the same reasons as their CLRA claims. They also alleged, however, that Apple knew of the defect by way of customer complaints and because Apple CEO Tim Cook was told of the defect. In dismissing the DTPA claims, the court concluded that there were no supporting facts that demonstrated Tim Cook was aware of the alleged defect, and the anonymous customer reviews posted to Apple’s website could not plausibly imbue Apple with knowledge of the logic board defect.

The case number is C 14-03824 WHA.

Attorneys: Omar Weaver Rosales for Uriel Marcus. David Michael Walsh (Morrison & Foerster) for Apple Inc.

Companies: Apple Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews